Understanding Credit Score Differences

Understanding Credit Score Differences

There are few numbers in life that matter as much to your financial outlook and well-being as your credit score. However, confusion is the norm for consumers when it comes to this important financial gauge.

The History of Credit Scores

Prior to the creation of standardized credit scores, lenders and loan officers would often develop their own "score card" to assess the risk of lending to a particular borrower. This score card could vary drastically from one lender to the next. The major issue with this original method was that it was based on a loan officer's ability to judge risk, rather than a common set of rules and specific calculations.

So, in the 1980's, the Fair Isaac Corporation set up the first general purpose credit scoring system based on credit bureau information in order to help remove the inherent inconsistencies that arose from having each lender perform their own credit diagnostics. It has since become known as the FICO score and the algorithm has been widely adopted by America's largest credit reporting agencies.

Why would my score differ between credit agencies?

The three major credit bureaus are Equifax, Experian and TransUnion. Simply put, the reason that the scores you receive may differ is that each score is dependent on the credit report that each receives and the scoring model they use.

In other words, Equifax might have not exactly the same information on you as Experian and vice versa. One credit bureau may be missing an account that either helps or hinders your score and will therefore report a different credit score than another credit bureau. If the system was perfect, this wouldn't happen. But since it isn't, you want to make sure that they all have the proper information by checking your freeTransUnion and Equifax credit reports on Credit Karma and your Experian on www.AnnualCreditReport.com.

Why would my score differ between the same credit agency?

Credit bureaus use many different scoring models, even within the same credit bureau. Each bureau can use dozens of different credit score models based on the requirements of different lenders.

Each credit score model has a slightly different formula that takes into account some of the over 200 different factors of your credit report; like a thumbprint, no credit score model is exactly the same. In addition, credit scores can change anytime so you have to make sure you are comparing credit scores from the same day.

As an example, a mortgage company will get a different score than a company providing auto loans, since they are looking for different types of credit history and credit factors.

Other Available Scores

While FICO is the most famous, there are several other versions and providers of credit scores, such as VantageScore, NextGen, BEACON and EMPIRICA. Some scores are directly developed by credit bureaus, while others are developed by outside companies.

Is there a "best score"?

In a word, no. In order to protect revenues, credit reporting agencies will often position their scores as the best or the most predictive. In reality, all scores must adhere to similar guidelines to be truly predictive, regardless of the final output number. All credit scores are built from the same base set of data and statistical procedures.

Like many products and services in the marketplace, there are a plethora of different options for you (and the businesses that serve you) to choose from, simply because every buyer is different. Based on cost and effectiveness in each buying situation, there are credit scores for sale to satisfy each customer.

Score Ranges

Just as a point of reference, it may be important for you to know what the score ranges are for each of the major scoring systems. The higher your score the better, as it is a general gauge of your overall creditworthiness in the eyes of lenders.

  • FICO Score: 300 -850
  • Score from Experian: 330-830
  • Score from Equifax: 300-850
  • Score from TransUnion: 300-850
  • VantageScore 3.0: 300-850

Bottom Line

Because there are hundreds of credit scores that measure many different probabilities, consumers generally do not need to be overly concerned with the type of score or even their number. It's also important to note that your credit score is a variable which can change every time your credit report changes. For these reasons, monitoring changes within a single score over time can be a better way to gauge your overall credit health.

These complicated facets of credit scores are exactly why we developed Credit Karma. By keeping the bureau and credit scoring model consistent, we are hoping to provide consumers with a single, easier-to-follow point of reference on their credit health. Best of all, it's always free to check your credit score with us. In this way, you can access your score as often as you want and always have a consistent baseline to better understand how your score is changing.

Disclaimer: All information posted to this site was accurate at the time of its initial publication. Efforts have been made to keep the content up to date and accurate. However, Credit Karma does not make any guarantees about the accuracy or completeness of the information provided. For complete details of any products mentioned, visit bank or issuer website.

All Comments

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8 Contributions
898 People Helped

Helpful to 862 out of 974 people

The thing that baffles me is that this is a free service that is intended to help you make better credit decisions. People are complaining it doesn't have all 3 scores, that it isnt 100% accurate etc... people ITS FREE! What other site is free and lets you update your score everyday and alerts you to inquiries etc? If you want accuracy pay for a service..even then your score could change in a minute!

1 Contribution
288 People Helped

Helpful to 288 out of 315 people

Unreal!!! I purchase my credit reports every other month. Since the last reports were pulled there have been no changes except the on-time payments, and my score still drops 14 points. I had three different people look at them. The F'in' reports are identical!!!! 

I think it's time to petetion congress for changes:

1.  Consumers should be able to get thier indididual credit scores and reports at least monthly at no charge.

2.  There needs to be more costly punative damages for credit reporting agencies, and creditors for not correcting, or producing complete documentation which substantiates their claim(s). (in a lot of cases, creditors/collection agencies have no obligation to verify the information they report unless the request comes from the credit bureau. And, then the creditor only has to send a confirmation to credit bureau that the debt exists.(no proof, just confirmation).

3.  When an individual's credit score negatively changes, the credit bureau should have to explain how/why the credit score changed.

It's my beleif that these 3 changes will do more to benefit consumers than any adverse effect it may have on creditors or credit bureaus. I look forward to hearing you thoughts.

3. 

1 Contribution
209 People Helped

Helpful to 209 out of 224 people

People, Credit Karma is just a tool for you to use. Believe in it or not, it helps you to understand your credit rating and scoring. But don't live by it. It is only a tool, a reference point. The idea is for you to better manage your personal lives and finances. Don't get wrap around the numbers or the points. A few points won't make a difference in you lives. But a denial of credit may affect them. So thank Credit Karma for this site. Use it only as A TOOL! to your advantage in this crazy world.

4 Contributions
89 People Helped

Helpful to 74 out of 87 people

transunion is so far behind time. i paid my auto loan off long ago. they say i still owe it! but let me be 8 seconds behind paying a credit card off.............. and it is all over their site. WHAT A BUNCH OF CRAP!

THEY SHOULD BE PUT OUT OF BUSINESS!

1 Contribution
90 People Helped

Helpful to 90 out of 95 people

Credit Karmas Transunion score for me has been the same when I pulled a Transunion report. I also have Life Lock which provides all three scores using Transunion as the main one. I have found them and Credit Karma consistent in their reports. As I understand the Credit card companies and others report your debt on the first of each month. That is why I pay my cards down before then and see my score rise. By taking your total credit card combined and adding them you then can divide that by your total credit limits. Example: One card has $5000 limit and another has $1500 limit which would give you $6500 total. Your debt on both cards are at $4500.

By taking $4500 divided by $6500 = 69% of your card usage. I think the credit agencies favor in a score best for those that are below 30%. Credit card have the worse effect on score. That could raise you back up about 10 points or more. I love Credit Karma and appreciate their services. I took up one of their offers on a Truck payment and lowered it from 6.9% to 2.98% which is saving me a bundle. Life insurance was the same. That offer some great services considering there was nothing back in the 70s or even 90s that could help some one moniter their credit.

3 Contributions
269 People Helped

Helpful to 198 out of 230 people

So my score was 794,  Then I sold my house and paid off the mortgage and also paid off a car loan and the score drops to 780.  This is such a scam and a joke to the American consumer who is fiscally conservative.  Shouldn't paying off loans increase your score? 

1 Contribution
11 People Helped

Helpful to 11 out of 11 people

I can appreciate this is a free service, and I'll be the first to say I have used this service faithfully for the last 3 years or so.  I think its great we can access it without fear of gimmicky membership trials offered by the 3 bureaus.  

I would be remiss if I didn't express my disappointment in the shift to Vantage scores.  I can also get my free scores using a combination of different credit card accounts that I have, and they all offer my free FICO score.  What used to be great about Credit Karma was that I could view by Transunion FICO score for free. Now I can see my TU and Equifax score for free, but because its a Vantage score, I only visit this site to see if something changes, but not for any other information.  What used to be an every day almanac of my credit information has become a weather vane I glance at every once in a while.  Basically I use it as a queue to go check other sites to find out what my FICO score is.

Thanks to the builders of this site for providing a free service like this, but please consider switching back to FICO.  Its a more meaningful score to consumers.  No one I talk to uses my Vantage score when I apply for credit.  Thanks for listening.

6 Contributions
13 People Helped

Helpful to 10 out of 13 people

Bottom line.... FICO IS THE ONE AND ONLY SCORE USED BY ALL LENDERS across the USA when evaluating you for credit. Name one bank that uses Vantage???? please!! Name one!

2 Contributions
36 People Helped

Helpful to 36 out of 49 people

Getting penalized for not having debt is a no,no! It's just not right that you HAVE to HAVE some kind of history of debt payment to get good rates. I so bad want to pay cash for everything (working on that) and not worry about all this doodoo! Someone needs to put a cattle prod to the credit agencies to do an accurate job at reporting. And a faster job on taking off things that are paid off and don't need to be on record. They're sure quick to add the negative to your list. How about we all barter---------?

4 Contributions
44 People Helped

Helpful to 44 out of 48 people

 <quote>This is because whenever u take on new debt your score usually drops at first and then as you make steady payments on it u get positive credit for not only making on time payments but for lowering this new debt.</quote>

Why doesn't the government put a stop on this absolutely idiotic thing called credit score? People that have no debt and only one credit card, will always have a bad credit score. Absolute bs.

The banks, car dealers and whoever prefer customers that carry an addional financial burden already.

An entire economy based on debt. If you have no debt, then you are simply non existant for banks and credit rating agencies. No wonder the rest of the world is laughing about the US.

Why can't we switch to keeping track of negatvie entries such as late payment, default etc. instead of punishing people that pay on time, carry no balance?

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